Pages

1
My entrepreneurship class at the Boston University School of Management presented business plans to a panel of Venture Capitalists last night. These are my top 5 takeaways:

1. Have an elevator pitch

The first person to present last night is the CEO of a really interesting company trying to change the way business is done on a massive scale. He gave a great presentation, and told a really impactful story about the need for his business and his solution. I was completely sold, but the VCs all had concerns about his ability to present his idea to the market. In one person's words, "If I can't explain your business in 2 sentences, we have issues.

2. Have a revenue model

It seems simple, but it is critical to have a clear business model. There are often several viable revenue models for a particular business, and you need to explicitly explain how your business will make money.


3. Show graphs, not numbers

When you don't have hard numbers, don't expose yourself to needless criticism. This is especially true when presenting long term projections such as 5 year projected revenues and net income. Since these are rough projections, showing trends is enough, and putting numbers on the screen is just inviting for trouble. And if you're going to show numbers, say year 5 revenues will be $10,750,000 not $10,754,886.13.

4. Business model matters

Just as there are multiple possible revenue models for most business, there are also multiple possible business models. Make sure that the model you are proposing is the one that makes the most sense. For example, one group put together a really nice presentation for a product they are looking to sell B-to-C at first, followed by a phase 2 shift to B-to-B sales. During the discussions, there was criticism of this choice. Criticism could have been avoided with a more thorough explanation of the choice of the business model.

5. Don't make claims you can't back up

This was a big one. Don't claim you can manufacture a product at a cost that seems abnormably low. Don't claim your product will be the most successful iPhone app ever created just because it helps the presentation. It is clear to the audience that you're taking liberties with your presentation, and this seems to be a really easy way to qualify yourself out of consideration.

Ron Bienvenu gave a great speech last week about entrepreneurship, and he raised some really interesting points. Ron has founded and sold 2 software firms, lead a hostile takeover, managed 50 public and private M&A events, and has raised over $250M through every possible method from venture capital firms. This guy is super smart, really charismatic and is clearly a phenomenal business man.

One of the points he brought up that really hit home was that almost everything is a commodity these days. Intelligence can be a commodity if you hire smart people. Money is clearly a commodity. Even ideas become commodities as ideas spread across the internet faster than companies can monetize them. Ron had no problem discussing his next big idea in front of an audience of entrepreneurs because the idea will likely become public knowledge anyway before he has a chance to bring it to completion.

So what is it that Ron believes sets successful entrepreneurs apart? In his words, "toughness". How you respond to setbacks, competition, disappointments and the unexpected dictates how successful your company will be. Anyone can hire a smart CFO to read a balance sheet or a good marketing person to execute a marketing plan. These are business skills. How you react when a customer is late with a payment and you can't make payroll, or a huge company decides to enter your space with a competitive product is where toughness really becomes essential the the survival of your company.

I'd love to hear your thoughts. This theory assumes that everyone has (or hires someone who has) the hard skills necessary to succeed. Is that a valid assumption? And is toughness really the differentiating factor for success?
Bill Belichick's decision not to punt on a 4th and 2 from his own 28 with 2 minutes to go during Sunday's game against Indianapolis has been THE topic of conversation here in New England for the last 2 days. Setting aside the unsuccessful results of the play, there are some lessons that can learned when looking at his decision, and the resulting media fallout.

1. If you don't like the rules to the game, don't play by them

Football is a game that follows a conservative structure. There are deviations and allowances for risk within the structure (run/pass rations, trick plays, etc.), but most teams play by similar basic strategies. Bill Belichick thought that playing within the established conventions (i.e. punting on 4th down from his own territory) would lead to failure, so he decided to buck convention and send his offense back out for 4th down.

This type of flexible thinking is valuable in business. Can't respond to an RFP? Work with your customer to change their requirements. See an opportunity to expand into a new space? What says you can't shift strategies and go for the win? Malcolm Gladwell wrote a tremendous article in the New Yorker on this topic.

2. Play to you strengths

By punting the ball Belichick would put the game in the hands of Peyton Manning, the Colts' best player. By going for it on 4th down the game was in the hands of Tom Brady, the Patriots' best player.

Similar to the first point, why compete on a level or negatively slanted playing field? This is one reason niche businesses are so successful; by "owning a space" you are forcing the competition to meet you at your strongest point.

3. Empower your employees

Belichick made his decision knowing that the NFL rarely rewards risk, and often punishes coaches for deviating from established wisdom. Bob Kraft, the owner of the Patriots has clearly created a situation where his employees are empowered to make difficult and risky decisions without fear of disproportionate retribution. Kraft understands the need to delegate responsibilities to his specialists, and allow them the autonomy to do what they think is best.

4. Wait before judging

The immediate reaction to Belichick's decision was extremely negative. All of the televised experts were incredulous, and some were calling it the worst decision they'd ever seen.

A day later a blog called Advanced NFL Stats ran the numbers, and found that by punting the Patriots would win 70% of the time, and by not punting they would win 79% of the time. While there is room for discussion about the numbers, at worst both options were equivalent, and at best Belichick gave the Patriots a better chance to win with his decision.

In business we have strong reactions to new ideas all the time, and pressure to come to immediate decisions. There are times when the appropriate decision is to wait, delve deeper into the facts, and only decide once a clear, emotion free understanding of the situation has been established.

5. High profile mistakes overshadow more important mistakes

Everyone talks about the big, high profile mistake. Nobody talks about the hundred other plays or decisions that go into determining the outcome of a game.

Many companies have a similar focus. Did you not make a sales number because a huge deal fell out at the end, or did you not make it because your team wasn't doing the day-to-day activity to fill its pipeline? Did your employee quit because of an argument with a boss, or did she quit because of a poor work environment? Often times enough focus on the minutia makes the bigger decisions less important.

Please leave comments if anything jumps out at you!

Welcome!

I work for a small tech company with an on online communications product and take night courses towards an MBA with a concentration in entrepreneurship. My wife works in marketing and brand management for a large company, and is very interested in applying social media to business problems. As such, I spend a lot of time talking and thinking about business problems.


I hope to use this blog as a space to explore some of the issues and observations that come up in my work, school or life and relate these back to business issues.